Consider the following balance sheet for Bank of America (in millions of dollars): Assets Liabilities 1. Cash and due from 6.25 1. Equity capital (fixed) 25 2. Short-term consumer loans (float rate) 62.50 2. Demand Deposits (float rate) 50 3. Long-term consumer loans (fixed rate) 31.25 3. Passbook savings (fixed rate) 37.5 4. Three-month T-bill (float rate). 37.50 4. Three-month CDs (fixed rate) 50 5. Six-month T-bill (fixed rate) 43.75 5. Three-month banker's acceptances (float rate) 25 6. Three-year T-bonds 75.00 6. Six-moth commercial paper (float rate) 75 7. 10-year, fixed rate mortgages. 25.00 7. One-year time deposits (float rate) 25 8. 30-year, floating-rate mortgages 50.00 8. Two-year time deposits (fixed rate) 50 9. Premises 6.25 337.50 337.50

a. Calculate the value of Bank of Americas rate-sensitive assets, rate-sensitive liabilities, and repricing gap over the next year. b. Calculate the expected change in the net interest income for the bank if interest rates rise by 1 percent on both assets and liabilities. If interest rates fall by 1 percent on both assets and liabilities. c. Calculate the expected change in the net interest income for the bank if interest rates rise by 1.2 percent on assets and by 1 percent on liabilities. If interest rates fall by 1.2 percent on assets and by 1 percent on liabilities. 2. What are the reasons for not including two-year time deposits as rate-sensitive liabilities in the ISG analysis for a commercial bank? What is the subtle but potentially strong reason for including demand deposits in the total of rate-sensitive liabilities?